MPWR - Embedded Expectations Analysis - 2020 10 02
Monolithic Power Systems, Inc. (MPWR:USA) currently trades at a historical high relative to UAFRS-based (Uniform) earnings, with a 46.3x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management may be concerned about revenue growth, inventory turnover, and product innovationsSpecifically, management may lack confidence in their ability to maintain revenue growth and expand additional capacity. Moreover, they may be concerned about the slow inventory turnover in Q2 and the performance of their business. Furthermore, they may be exaggerating the potential of their server growth, how fundamental their products are for 5G technologies, and their technology development. In addition, they may have concerns about the current nature of the macro environment and the product specifications they plan to make. Finally, they may lack confidence in their ability to enter the HPA market and generate revenue from it by next year
Monolithic Power Systems is a fabless semiconductor company. The company designs, develops and markets power solutions for systems found in consumer, computing and storage, automotive, industrial, communications and consumer applications. The company's primary product families include the following: Direct Current (DC) to DC products, which are used to convert and control voltages within a range of electronic systems such as portable electronic devices, wireless Local Area Network access points, computers, and monitors, automobiles and medical equipment; and Lighting Control Products, which include lighting control integrated circuits that are used in backlighting and general illumination products.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
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